Instant asset write-off for eligible businesses

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(ATO)

Under instant asset write-off eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used, or installed ready for use.

Instant asset write-off can be used for:

  • multiple assets as long as the cost of each individual asset is less than the relevant threshold
  • new and second-hand assets.

It cannot be used for assets that are excluded from the simplified depreciation rules.

The instant asset write-off eligibility criteria and threshold have changed over time. You need to check your business’s eligibility and apply the correct threshold amount depending on when the asset was purchased, first used or installed ready for use.

Changes from 12 March 2020

From 12 March 2020 until 30 June 2020 the instant asset write-off:

  • threshold amount for each asset is $150,000 (up from $30,000)
  • eligibility has been expanded to cover businesses with an aggregated turnover of less than $500 million (up from $50 million).

On this page:

See also:

Eligibility

Eligibility to use instant asset write-off on an asset depends on:

  • your aggregated turnover (the total ordinary income of your business and that of any associated businesses)
  • the date you purchased the asset
  • when it was first used or installed ready for use
  • the cost of the asset being less than the threshold.

If you run a small business and choose to use the simplified depreciation rules, you must use instant asset write-off on all eligible assets.

Businesses with an aggregated turnover of $500 million or more are not eligible to use instant asset write-off.

From 1 July 2020 the instant asset write-off will only be available for small businesses with an aggregated turnover of less than $10 million and the threshold will be $1,000

Thresholds

The thresholds have changed over the last few years and are as follows:

Instant asset write-off thresholds
Eligible businesses Date range for when asset first used or installed ready for use Threshold
Less than $500 million aggregated turnover 12 March 2020 to 30 June 2020 (see note)

$150,000

Less than $50 million aggregated turnover 7.30pm (AEDT) on 2 April 2019 to 11 March 2020

$30,000

Less than $10 million aggregated turnover 29 January 2019 to 7.30pm (AEDT) on 2 April 2019

$25,000

Less than $10 million aggregated turnover 1 July 2016 to 28 January 2019

$20,000

Less than $2 million aggregated turnover 7.30pm (AEST) on 12 May 2015 to 30 June 2016

$20,000

Less than $2 million aggregated turnover 1 January 2014 to prior to 7.30pm (AEST) 12 May 2015

$1,000

Less than $2 million aggregated turnover 1 July 2012 to 31 December 2013

$6,500

Less than $2 million aggregated turnover 1 July 2011 to 30 June 2012

$1,000

Make sure you have checked the eligibility criteria for your business.

Note: For eligible businesses with an aggregated turnover from $10 million to less than $500 million, the $150,000 threshold applies for assets purchased from 7.30pm (AEDT) on 2 April 2019 but not first used or installed ready for use until 12 March 2020 to 30 June 2020.

Exclusions and limits

There are a small number of assets that are excluded.

In addition, if you purchase a car (a passenger vehicle, except a motor cycle or similar vehicle, designed to carry a load less than one tonne and fewer than nine passengers) for your business, the instant asset write-off is limited to the business portion of the car limit of $57,581 for the 2019–20 income tax year. For example, if you use your vehicle for 75% business use, the total you can claim under the instant asset write-off is 75% of $57,581, which equals $43,186.

You cannot claim the excess cost of the car under any other depreciation rules. For a worked example, refer to example 1 below.

See also:

Cost of asset exceeds threshold

If you are a small business using the simplified depreciation rules, and the cost of the asset is the same as or more than the relevant instant asset write-off threshold, the asset must be placed into the small business pool.

If you are not using the simplified depreciation rules, and the cost of the asset is the same as or more than the relevant instant asset write-off threshold, you may be able to use the Backing business investment – accelerated depreciation for certain qualifying assets or use the general depreciation rules.

See also:

Work out your deduction

The entire cost of the asset must be less than the relevant threshold, not including any trade-in amount. Whether the threshold is GST exclusive or inclusive depends on if you’re registered for GST.

To work out the amount you can claim, you must subtract any private use portion. The balance (that is the portion you use to earn assessable income) is generally the taxable purpose portion (business purpose portion). While you can only claim the taxable purpose portion as a deduction, the entire cost of the asset must be less than the relevant threshold.

This also applies to research & development (R&D) use. When you work out the amount you can include in the calculation of your R&D tax offset for your R&D use you must subtract any non-R&D use including the taxable purpose portion and private use portion.

Later sale or disposal of asset

If you use the instant asset write-off for an asset and then sell or dispose of that asset, you need to include the taxable purpose portion of the amount you received for the asset in your assessable income for that year.

If you use the instant asset write-off for an asset that is later destroyed (for example, in a bushfire or flood) then the amount you receive (such as from an insurance payout) for the destruction of the asset is included in your assessable income.

See also:

Example 1: Purchase of a motor vehicle for business purposes – the effect of the car limit for depreciation

Edward and Edna own and run a small irrigation supplies business. On 27 March 2020 the business purchases a luxury car that is designed to carry passengers, for $80,000. The instant asset write-off threshold at the time they first use the car in the business is $150,000.

The cost of the car for depreciation is limited to the car limit at that time. As the cost of the car is above the $57,581 car cost limit for depreciation, the business can only claim an instant asset write-off of $57,581 for the year ending 30 June 2020. The business can’t claim the excess cost of the car under any other depreciation rules.

They also decide to update their work ute and the business purchases a ute for $65,000 on 27 April 2020. The ute isn’t designed to carry passengers (and has been set up with all the trade tools in the tray) so the car cost limit for depreciation doesn’t apply. The business can claim a full deduction of $65,000 as an instant asset write-off.

End of example

 

Example 2: Purchasing multiple assets

PlumbCo is a company that operates a plumbing business that has an aggregated turnover less than $10 million. On 10 April 2019, PlumbCo purchases a new van for $22,000 and starts to use it for the business. The following month PlumbCo purchases a trailer for $14,000 and starts to use it to support the business.

PlumbCo has spent a total of $36,000. As the $30,000 instant asset write-off threshold applies to each asset, PlumbCo is able to claim a deduction for both the van and the trailer in its 2019 tax return.

 

Label 6X Depreciation expenses on company tax return.
Question 10 Small business entity simplified depreciation field on tax return.

 

Question 10 Small business entity simplified depreciation field on tax return.

 

PlumbCo includes the combined amount of $36,000 at label 6X of the Company tax return. Because PlumbCo is a small business entity, the amount is also included at label 10A.

End of example

 

Example 3: Exceeding the threshold

Daryl owns a small electrical business, Daryl’s Electrical, which has an aggregated turnover less than $10 million. On 28 July 2017, Daryl purchases a ute for $40,000. He estimates he will use the ute 40% of the time for his business.

Even though the cost of the ute to the business is $16,000 ($40,000 × 40%), Daryl can’t use the instant asset write-off as the total cost of the ute of $40,000 exceeded the relevant threshold of $20,000.

Instead he adds the $16,000 business portion of the ute’s cost to Daryl’s Electrical small business pool.

End of example

 

Example 4: Business and personal use of asset

On 18 May 2018, Fiona buys a new computer for $6,800 that she uses 80% of the time for her business as a sole trader. She also bought a new printer for $700 that she uses for 100% of the time for business purposes.

For the computer, Fiona calculates the business use portion that she can claim a deduction for under the instant asset write-off as $5,440 (80% of $6,800). For the printer, she can claim the entire cost of $700.

Label P8 Business income and expenses on the Business and professional items schedule.
Label P10 Small business entity simplified depreciation on the Business and professional items schedule.

Fiona includes the combined amount of $6,140 at label M(P8) and P10 of the Business and professional items schedule, which is filled out when completing her tax return.

End of example

 

Example 5: Asset purchased but not ready for use

Leslie is a florist and her business required a new van to help expand her deliveries.

Leslie purchased a van for $22,500, which was paid for on 23 January 2019. Under the terms of the contract, delivery of the van was made on 30 January 2019. The van was not ready for use until after the 29 January 2019. At that time, the instant asset write-off threshold was $25,000. Leslie is able to claim the entire cost of the van in her 2019 tax return.

If the van had been delivered before 29 January 2019 and Leslie started to use it at the time of delivery, Leslie would not have been able to write-off the entire cost of the van. This is because the cost of the van cost exceeded the threshold applicable at that time of $20,000.

End of example

See also:

  • Cars – cost limit for depreciation

 

 

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